Lord Turner advocated a tax on the millions of transactions which would reduce banks profits and the vast sums they are currently able to pay out in bonuses.

He said the tax would be "a nice sensible revenue source for funding global public goods".

Lord Turner also said that promoting London as a global financial centre was no longer one of his main concerns.

"The really fundamental question is whether the overall level of financial services pay is a consequence of the swollen financial sector which has resulted from oversimplistic financial deregulation."

Former Labour welfare minister Frank Field backed the proposals, saying: "It looks like Adair Turner has fired the starting gun on thinking more seriously about the City and what it is for and what kind of pay people should expect.

"When the City has largely made money by moving money around and not by making anything, it is clear the pay is out of kilter."